Route baselines for emissions
Why is it necessary to understand the implication of the added emissions cost component in freight?
Emission regulation is becoming increasingly impactful on voyage cost. All contracting parties need to understand how to assess and manage these added costs.
Why are consistent emission performance baselines and metrics by route increasingly important to ship owners and charterers?
Using the independent and trusted Baltic standard as a reference point to assess voyage emissions, against useful transport work delivered, provides a more consistent and mutually accepted way to recognise and optimise delivered performance.
How could these Baltic voyage performance baselines by route be used in practice to fund the added investment required to lower emissions?
A third-party emissions verifier is engaged by the contracting parties, to compare the actual voyage emissions against the amount of cargo delivered on that route against the Baltic standard baseline.
Where voyage emissions per 1000mt of cargo delivered is below the agreed baseline a credit to the owner is placed in an escrow account. These are tallied at the end of the time charter and returned to the owner.
Which reference metrics are provided in the calculator and how were they selected?
The reference metrics provided are the IMO CII, IMO EEOI, CO2/day and CO2/1000 tonnes carried. The first two were included since they are the standard IMO metrics and the second two were added after feedback following market consultation.
Why is it helpful to have more than one reference standard?
This allows market participants to select the most appropriate metric for their trade. For example, CO2/1000 is most applicable to round voyage trades, CO2/ day for long charters, and EEOI for vessels which triangulate to improve their efficiency. CII is retained because this is a compliance metric.
Given the CII rating is assessed over a year what does this mean for the voyage ranking produced?
The ratings provide an indication of the CII rating outcome for a vessel if traded continuously on that route as per Baltic description for the year. It also provides an indication of the relative impact on the CII rating by electing to trade a vessel on those routes, some being more or less favourable than others for demonstrating compliance.
Why does the rating in the CII rating estimator change over time?
The regulation requires a steady tightening of the rating over time. The estimator provides an indication of how the standard vessel traded on that route would see a deteriorating ranking over time.
Why is it helpful to refer to the standard Baltic Routes and ship descriptions in the baselines?
The market is familiar with the existing routes and ship descriptions which enable the calculation of variations in freight for any given variation in the trade. By using this well understood approach, freight emissions, along with their associated costs can be compared by route and candidate ship.
Why has the Baltic Exchange initiated a market consultation on emission baselines and calculators?
Compliance metrics like the IMO CII (Carbon Intensity Indicator) are not consistent and may not be a good indicator of efficiency, or comparative emissions by trade or route. This makes it more challenging for the market to understand the emissions component of the voyage.
Where can the Baltic Exchange standard route and ship descriptions be found?
These can be found in the “Guide to market benchmarks” on the Baltic Exchange website, in the Baltic Exchange App or alternatively by contacting balticbroker@balticexchange.com.
Why is it helpful to compare variations in actual voyages with these static reference points?
These route-based references are intentionally kept simple to provide an understood and consistent point of comparison.
Where do the sailing distances used in the calculations come from?
Sailing distances for the standard Baltic routes are obtained using voyage estimation software.
Given port congestion, loading and unloading times will vary, how are the port days used in the calculations determined?
The port days are based on averages over time learnt though experience and consultation with the market. For the freight calculations, panellists will report severe delays and make necessary adjustments.